 | | | | Deal4loans NEWSLETTER for January 2009 | | | | | Right Time to Buy Your Dream Home
Bring in the New Year in your new home!! For all those who have postponed their dream of buying a house, here is some great news. Home loan rates have now been reduced, not only for new borrowers but even for existing borrowers. Public sector banks have already announced the drop in their home loan rates.
Public sector banks have a scheme where a new home loan up to Rs 5 lakhs will carry a much lower interest rate of 8.5%. The interest rate on loans of Rs 5-20 lakhs will be capped at 9.25%. In India, almost 80% of home loans are below Rs 20 lakhs. Besides the low interest rate under the scheme valid till June 30, 2009, public sector banks will forego processing fees and pre-payment charges and further provide free life cover. This interest rate will be unchanged for the next five years. Should there be a home loan product at a lesser rate, the bank will match it.
The benefit of this scheme is that the borrower’s risk is postponed for five years. As the interest rate will be reset after five years and the borrower will then have the option to go for a fixed rate or a floating rate. Till then he has the option to stay with the new interest rates offered by the banks. Hence the EMI on a Rs 5 lakhs loan over 20 years will drop by Rs 1,166 and on a Rs 20 lakhs loan by Rs 3,704. At present, loans up to Rs 20 lakhs carry a fixed interest rate of 12%. But the hurdles in availing a loan from a public sector bank would be they do not offer higher amount of loans very easily. They avoid taking high risks and offer less amount of loans than private banks or even multi nationalized banks would sanction. So you may not get the exact loan amount you are looking for. Their documentation criteria are also more than compared to private banks. Your loan processing time may also be lengthier at a public sector bank. One needs to look at the benefits and hurdles while taking a loan from a public sector bank.
The purpose for our government to reduce the rates for public sector banks is to help lift the economic growth that has been slowing down in the past four years. Lower interest rates prop up the demand for homes, which in turn, creates demand for steel and cement and generates jobs in the construction sector. The fall in home loan rates is expected to boost the ailing housing market to a great extent.
If you are able to take a five year tenure housing loan then this is the best time to avail this offer. Hence it is up to an individual to see what are his requirements and capabilities, and accordingly cash in the benefit.
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